Apple looks set for a push into m-commerce

Thursday 13 February 2014 | 17:13 CET | Background

Apple has not played an active role in mobile payments so far, but that may change this year. NFC is not an option, but Bluetooth-based iBeacon and AirDrop have the potential to be used in m-commerce applications. Apple has been seeding the market with compatible phones since 2011, which means that the installed base is ready.

Apple wants to develop mobile payment services, the Wall Street Journal reported end of January. Eddy Cue, Apple's iTunes and App Store chief and a key advisor of chief executive Tim Cook, has met with industry executives to discuss Apple's interest in handling payments for physical goods and services on its devices, according to people familiar with the situation.

In another sign of the company's interest, Apple moved Jennifer Bailey, a longtime executive who was running its online stores, into a new role to build a payment business within the technology giant, three people with knowledge of the move said. Apple also spoke to at least five other well-known executives in the payment industry about the position before selecting Bailey.

Investor Carl Icahn, who recently raised his stake in Apple, urged the company to invest in mobile payments. Currently, Apple handles payments for movies, books, and music purchased through its iTunes store.

iTunes for digital content

With iTunes, Apple has established a payment relation with its customers – it has credit card details on file. Payment through iTunes has its limitations though. It’s a proven formula for certain kinds of digital content, particularly software (apps) for which Apple has built an ecosystem users love.

The formula also works for music and, to a lesser extent, video – but users can get those from other sources and continue to do so.
Apple has not exactly cornered the market for books and magazines. Many or indeed most publishing companies offer their titles on iOS devices, but shortly after launching Newsstand, Apple had to allow companies to sell subscriptions directly, bypassing iTunes, and let subscribers activate content in the app.

To summarize: payment solutions work best with a captive audience. Software is an Apple monopoly, the iTunes Music Store is compelling enough, but for print media, it has not won out. Retail payments are even further removed from the iTunes comfort zone, an area dominated by cash and cards.

No NFC for Apple

Apple has ignored contactless payments so far. The technology and services are however picking up speed in markets around the world. NFC Card Emulation – the credit/debit card goes into the phone – is still at least several months from mass deployment in the two iPhone core markets, North America and Europa. But after years of promise, markets are finally warming to the concept.

For Apple, NFC is not an option, simply because it has not sold any hardware. Samsung and Google have been seeding this market the past few years by building NFC into handsets, even when mobile carriers tend to block its application to this day.

Apple would need a few years to introduce NFC features in the high end model and subsequently pass them on into the mid and lower tiers.

iBeacon in the installed base

iBeacon however has reached the point of maturity. It’s a proprietary; Bluetooth 4.0 (Bluetooth Low Energy) based protocol for indoor location mapping and geofencing. It was launched with iOS 7 in September 2013 and then more or less slipped under the radar, but that could change.

iBeacon is supported by iPhone 4S and newer, iPad 3 and newer (iPad Mini included) and the 5th generation iPod Touch, devices that can run iOS7. The iPhone 4S is the entry model now, meaning that Apple has sold enough compatible devices since 2011 to reach the majority of the active user base and commercially launch iBeacon. The Apple Developer Support website shows that 82% of all devices run on iOS 7 (as of 9 February).

Retailers can install Bluetooth transceivers in stores and use them to identify customers, track the customer journey, and push notifications to regular customers. Bluetooth is also used to initiate AirDrop, the exchange protocol for sharing data and pictures between other nearby iOS 7 devices. After two devices have been paired, they share data over WiFi.

iBeacon and AirDrop could be used at point of sale for exchanging coupons and receipts. The iPhone and iCloud serve as extra authentication, and the iPhone 5s adds the TouchID fingerprint sensor to that as well. It could be made to work with all kinds of merchant apps and even with the online checkout methods that the credit card issuers have developed.

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